Art Brodsky complains about the broadband duopoly:
We’ve argued that broadband is a duopoly, with Federal Communications Commission (FCC) statistics showing that just about everyone who has broadband gets it from either the telephone company or the cable company. The FCC has affirmatively pursued the policy of creating this situation, and it’s one of the main reasons we need a Net Neutrality policy. There is no real choice.
The new Kagan study shows just how un-competitive the broadband market is. Here’s the title of the study: “Cable Modem Vs. DSL: Rivals Side-Step Big Price Wars So Far.”
Not only are there only two “choices,” in supplier, there’s little evidence of competition on one factor that really counts–price. In their July 6 Insights email newsletter, Kagan puts it fairly simply: “Though the battle for broadband access subscribers is intense, there’s no screaming price war between cable TV and telcos, and Kagan Research doesn’t expect one in the foreseeable future.” You can read the report here.
There are several things to say about this. First, this doesn’t match my experience. I signed up for a cable modem a year ago at an introductory rate of $26.99/month for six months. After that rate expired, I called my cable provider and threatened to switch to AT&T (who was offering a $14.99/month introductory rate), and they offered me a rate of $29.99/month with a 1-year contract. So not only am I paying significantly less than the Kagan article shows, but I’ve also experienced direct price competition for my business.
Maybe St. Louis is just a more competitive market than most. But it’s also possible that the competitors have kept their official prices steady while offering more discounts, rebates, and special deals. The Kagan article doesn’t have a lot of detail about its methodoloy, so it’s hard to be sure.
Secondly, the lack of a “screaming price war” doesn’t prove there’s no competition. Look at the chart:
It looks to me like the price of DSL has been dropping at an annual rate of about 8 percent. How many other products drop in price by 8 percent per year? At the same time, “cable systems have increased their download speeds to a maximum of 30 mbps, versus a 10 mbps top common just a year ago, to help justify premium broadband pricing.” In other words, the telcos and cable companies have chosen to compete in different directions, one rapidly increasing connection speeds, and the other steadily cutting prices. It’s hard to see why those are developments we should be lamenting.
Finally, look at the last paragraph of the article:
“Eventually, cable will probably have make some reductions to cater to the lower end of the consumer market simply to get more customers,” concludes Rondeli. “At this point, though, cable operators don’t see the need.”
Sure sounds like there’s some competition to me! Right now, cable companies have a superior product so they see no need to cut prices. The “screaming price war” is likely to break out once the telcos start rolling out new fiber infrastructure. Regulatory policies that hasten the roll out of such fiber (i.e. cable franchise reform and not tying up the Internet in red tape) is the best medicine for a more competitive broadband market.
The cable companies and the Baby Bells are competing on price and features, and as a result, broadband service is getting faster and cheaper. It’s always possible to argue that progress would be happening even faster with more competition, but it’s wrong to pretend that there’s no difference between a monopoly and a duopoly.
The Technology Liberation Front is the tech policy blog dedicated to keeping politicians' hands off the 'net and everything else related to technology.
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